Blog Layout

Estate Planning? Let's Talk About Your Life Insurance Policy

websitebuilder • Feb 07, 2019

“The Tax Cuts and Jobs Act of 2018 (TCJA) put in place a variety of changes to both individual and business tax structures.”

Increases in the estate tax exemption has an impact on how some people are thinking about life insurance, says ThinkAdvisor in the article “Estate Planning Is Still Important.” However, before making any changes, consider the larger picture and think long, not short, term.

Let’s start with why many people buy life insurance policies . As young parents, they buy life insurance so a surviving spouse and family will be able to continue to live in their home, pay the mortgage and send children to college. Another reason for life insurance is to cover the cost of estate taxes.

Remember the new higher estate tax exemption is federal. Your heirs may still have state estate taxes and inheritance taxes, depending upon where you live. Having an insurance policy will still help with the costs of settling an estate and paying any taxes that are due.

The new tax exemption also has a sunset date. The year 2026 may seem far away. However, it will arrive, while we are busy with our lives. It may be much harder and more expensive for an individual to purchase a life insurance policy in 2026 than it is right now.

If someone is very old or in ill health, they have a different window of time for planning. However, if you are in your middle years or relatively healthy, now is not the time to put off purchasing life insurance or to let an existing policy lapse.

We know that political landscapes change. If they do, and you want to buy a policy, there may be additional obstacles in the future.

Life insurance also serves as a tool for your estate. If your estate plan seeks to distribute an inheritance equally from assets in a traditional IRA, life insurance can become an equalizer. Let’s say one child is in a much higher tax bracket than the others. Upon receiving the IRA, they will have to pay more in taxes than the others. The child in the lower bracket will end up with a larger sum of money, having lower taxes on their inheritance. This could lead to sibling arguments, which are not uncommon when brothers and sisters become heirs. The insurance policy proceeds can be used to make up the difference.

Another point to consider is who owns the insurance policy? If it is owned by a trust, you may not have the legal right to make a change. If the trustee does not agree that the policy should be liquidated or cancelled, they may not allow the change to go forward.

Your estate planning attorney will be able to review your life insurance policies, when she reviews your overall estate plan. Each part of an estate plan works best, when all parts work in concert.

Reference: ThinkAdvisor (Jan. 11, 2019) “Estate Planning Is Still Important”

How to Get Estate Planning Off Your To-Do List

17 Apr, 2024
Stop saying “we really need a Will!” and start making your plan in a few simple steps.

The Art of Being a Successful Snowbird

09 Dec, 2019
“In the next few months, thousands of northerners — so-called “snowbirds” — will escape their snowy, cold climates to spend the winter in warm, sunny spots in the southern or western part of the United States.”

Do Name Changes Need to be Reflected in Estate Planning Documents?

27 Nov, 2019
When names change, executing documents with the person’s prior name can become problematic. In estate planning documents, where there are risks about being able to make decisions in a timely manner or to mitigate the possibility of an estate challenge, a name change to update documents is an ounce of prevention.

Basic Financial Planning Strategies for Parents

20 Nov, 2019
Even if you have taken good care of your finances over the years, adding a child to the family can change your financial situation significantly. This is why experts recommend parents begin planning for their financial security as soon as possible. Here are a few tips for parents on how to get started with financial planning.

Are Seniors Prepared for Natural Disasters?

20 Nov, 2019
With hurricanes, tropical storms and wildfires becoming routine events, data from the National Poll on Health Aging suggest that older adults, loved ones and their care providers should take time to prepare for how they will cope and communicate in an emergency. The question is not if something will occur, but when. Having a plan in place for disaster is important for seniors. So is having an estate plan, to prepare for life’s unexpected occurrences. If you don’t have an estate plan, speak with an estate planning attorney soon to have a will, power of attorney, healthcare proxy and other planning documents in place.

When Selecting Beneficiaries Gets Overlooked

04 Nov, 2019
“If you’ve ever spent time working through your estate plan with a professional, you know how important it is to select and update your beneficiaries. Failing to do so can result in costly mistakes—for you and your loved ones.”

How Does an Executor Obtain a Credit Report for Decedent?

By websitebuilder • 30 Sep, 2019
“While it’s not something many people think about until faced with the issue, obtaining a credit report for a deceased person is important. You may need to make sure the credit report is accurate and take stock of any creditors you need to notify of the death or see if there’s any unresolved debt that you’re not aware of.”

Ho! Ho! Ho! Do this before the holiday season makes you too busy

18 Sep, 2019
Nothing is Certain but Death and Taxes “Most of us have heard the quote from Benjamin Franklin, ‘In this world, nothing is certain except death and taxes.’” No one actually enjoys paying taxes, and few of us really want to think about our own death, but both require advance planning...

The Conversation with Your Doctor, Estate Planning Lawyer and Family Members

07 Sep, 2019
“The best way to ensure that they know and understand your wishes, is to take a copy of your advanced healthcare directive or living will with you to your next check up and talk to your physician about it, then ask them to keep the copy on file.” Everyone needs...

Relocating for Retirement? What You Need to Know

01 Sep, 2019
“One of the great things about being retired is that you no longer have a job tethering you to a particular location. You have the freedom to move. However, just because you can pick up and go, doesn't mean it's a good idea to go just anywhere.” Sometimes having too...
More Posts
Share by: